The 20th anniversary of India's economic liberalisation was celebrated in remarkably studied silence. The odd newspaper article apart, there was no official hubris over the epochal changes undertaken in 1991 by a clutch of reformers, many of whom occupy key positions in the current government. A report by C Rangarajan, the prime minister's economic adviser, throws some light on this extraordinary display of reticence. The message from the former central banker who, alongside Manmohan Singh, untied many of the knots that led to the balance of payments crisis in July 1991: it's not business as usual in India in July 2011. Graft has paralysed the government and the economy is hurting. Prime Minister Singh cannot ignore this cautionary advice from a fellow reformer and a friend.
Mr Rangarajan sees a lost opportunity in India's economic management over the past two years. A stable government that had successfully negotiated the most catastrophic global bust in living memory could have seized the opportunity to roll out infrastructure, push reforms and improve its welfare spending. Instead, India finds itself slowing down appreciably — Mr Rangarajan reckons the economy will grow by 8.2% this year. Inflation does not seem to be easing after 2009's disastrous drought. The government is adrift. And business sentiments are plummeting. The road back to 9% growth, according to Mr Rangarajan, needs clarity and stability in policy-making, a reformist agenda, fiscal correction and inflation control. Above all, the government must restore the environment that encourages risk taking so that investment climbs to 33% of the gross domestic product.
The list of nettles is fairly long. In interactions with industry, Mr Rangarajan's council came across these recurrent wails. Lack of power, roads and ports; delay in government purchases; interest rates hurting sales of consumer durables; rising costs eroding profitability; absence of a corporate bond market; shortage of skilled labour; and delayed environmental clearances. Nothing the government isn't aware of, but in sum these are scalping the rate at which India invests, and hence grows. Well-meaning advice alone will, however, not shake the government out of its trance. Government files are moving up to unnecessarily higher levels of scrutiny if they are moving at all. The spectre of corruption needs to dissipate before government decision-making revives. Or if a bigger spectre were to appear. Nothing focuses the mind more than a crisis and it would be a chilling economic history that recalls 2011 as the year India waited for one to strike.